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On the up in Tanzania for Wentworth and Orca

The power gap is widening in Tanzania making the case for gas
Gas inlet pressure at Kinyerezi-1

Tanzania has struggled to pay its debts to local gas producers but there are signs this is changing, with Wentworth Resources and Orca Exploration posting strong quarterly results on improved collections and higher gas demand.

Wentworth said it was on track to be debt free by January 2020 as production continues on track in Tanzania. Average production during the third quarter was 77.93 million cubic feet (2.21 million cubic metres) per day, up from the 65.6 mmcf (1.86 mcm) per day reported in the second quarter at Mnazi Bay.

Production for the full year should range from 68 to 72 mmcf (1.93-2.03 mcm) per day, Wentworth said in newly specific targets. During the first 10 months, production averaged 70.35 mmcf (1.99 mcm) per day.

While the third quarter’s output was up, this was constrained by the MB-2 well being shut-in, owing to a flowline problem to the MB-3 cluster. The partners on the Mnazi Bay project are considering how to restore production from the MB-2 well but are planning to recomplete the MB-4 well in the Lower Mnazi Bay sands in the meantime.

Volumes from the MB-4 well will allow production to increase to 90 mmcf (2.54 mcm) per day from Mnazi Bay, starting in December.

“Stable production from the field to meet existing and growing demand is allowing the [joint venture] partners to anticipate higher production levels into 2020 and we will look to provide full year 2020 production guidance early in the new year. Receivables are now the lowest the JV partners have experienced since production into the transnational pipeline began,” Wentworth’s interim CEO Katherine Roe said. “With a near debt free position, growing cash balance, a maiden dividend paid last month and a simplified corporate platform, Wentworth is in robust financial health and well positioned to meet the increasing demand we foresee in Tanzania.”

Roe took over the company on November 13, when her predecessor, Eskil Jersing, was announced to be stepping down with immediate effect.

Demand is increasing, with more use of gas-fired power plants – such as Kinyerezi-1, -2 and Ubungo II – versus hydropower. The Kinyerezi-1 extension should be commissioned in mid-2020, later than previously thought, bringing demand of up to 30 mmcf (847,000 cubic metres) per day. Industrial users are also taking more gas, with Dangote Cement using 15 mmcf (423,000 cubic metres) per day and Goodwill Ceramics at 5 mmcf (141,200 cubic metres) per day.

Production should rise in 2020, Wentworth continued, as the flowline connecting MB-2 is restored, MB-4 flows from the Lower Mnazi Bay sands and chokes are replaced on four wells in the first quarter.

As of October 31, Wentworth held around $14 million of gross cash, up from $10.6mn at the start of the quarter, with the final debt repayment of $1.67mn due in January 2020. Payments from state-owned gas offtakers Tanzania Petroleum Development Co. (TPDC) and Tanzania Electric Supply Co. (TANESCO) were described as consistent, with TPDC receivables now running at one month.

The company’s performance suffered in the second quarter owing to strong hydropower performance, taking market share from the power plants it supplies. Wentworth has a 31.94% stake in Mnazi Bay, which is operated by Maurel et Prom with 48.06% and TPDC has the remaining 20%.

Orca Exploration also posted results this week, reporting revenues were up by 42% for the quarter, at $21.5mn versus $15.1mn. This was driven by sales to TANESCO, with gas deliveries up 45% at 63.4 mmcf (1.79 mcm) per day in the quarter. While volumes were up for Orca, prices slipped by 12% in the period. Net income was flat at $2.6mn for the quarter, versus the same quarter in 2018, although adjusted funds flow from operations was up 98% at $10.2mn.

Orca appointed a committee to consider options in July for the company and, in September, it said it had charged RBC Capital Markets with reviewing “strategic alternatives”.

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